From a nondescript strip mall in Sunnyvale, a company called Picarro is positioning itself to be a leader in greenhouse gas monitoring and reporting.

With Congress under pressure to act on global warming legislation before December’s United Nations climate change conference in Copenhagen, there’s a lot of talk about the emerging “cap-and-trade” economy.

The idea is that virtually every entity — from municipal landfills and coal plants to states and nations — will have limits, or caps, on how much greenhouse gas they can emit. Entities that emit less than their allotment can trade or sell their carbon credits to polluters, translating their conservation efforts into cash.

But how does a company, much less an entire country, know for certain how much carbon dioxide, methane and other greenhouse gases it is emitting into the atmosphere?

That’s where Picarro comes in. The privately held company’s 50 employees, many of them engineers, environmental scientists and physicists by training, are fine-tuning a variety of scientific instruments that can measure specific greenhouse gases such as carbon dioxide and methane in quantities as small as parts per billion. The company is backed by Benchmark Capital, Greylock Partners and DAG Ventures.

Currently, carbon emissions are largely determined by what’s known as inputs and inventories: Users account for the amount of coal going in, and estimate the amount of greenhouse gases coming out.

That’s a far cry from actually measuring, with scientific accuracy, the gases spewing into the air. The gap has some scientists worried that a trillion-dollar global carbon market will develop that’s largely based on estimates, intricate computer models and Byzantine accounting systems — a scenario ripe with potential for fraud and abuse. Already, two European companies that verify carbon offsets have been suspended by the United Nations.

“There are so many variables with inventory models,” said Eric Crosson, a physicist and Picarro’s chief technology officer. “What kind of coal is it? How hot is the fire that’s burning it? Some form of validation has to happen here, or we’ll just get it wrong.”

Andy Jacobson of the National Oceanic and Atmospheric Administration, the federal agency that focuses on the condition of the oceans and the atmosphere, agrees.

“The carbon credit market and proposed EPA regulations both operate by using an inventory approach, or as we put it ‘bottom-up’ emissions estimates,” said Jacobson, who is involved in NOAA’s CarbonTracker project, which analyzes the concentrations of greenhouse gases in the atmosphere. “There is considerable history of bottom-up emissions inventories for other gases being very wrong, so we believe that atmospheric verification is absolutely crucial. In the end, it’s actually the concentrations in the atmosphere that we care about, since those drive the radiative effects that cause global warming.”

The devices have been deployed at research stations around the world; the company’s biggest client is the Chinese Meteorological Association. Two Picarro analyzers spent the summer on the Greenland Ice Shelf, measuring the composition of air bubbles in the ancient atmosphere trapped deep in the ice. Picarro is working toward the day when the analyzers can be much smaller and hand-held.

Marc Fischer, a researcher with the Lawrence Berkeley National Laboratory, is taking atmospheric measurements to quantify California’s greenhouse gas emissions in a pilot project for the California Energy Commission. As part of that effort, a Picarro analyzer has been set up at a television transmission tower in Walnut Grove, south of Sacramento.

“The more modern instruments are valuable because they require less frequent calibration,” said Fischer.

Michael Woelk, Picarro’s president and CEO, foresees a time when his company’s instruments will be widely used to detect the amount of toxins in the air near a school, or track the origin of food and consumer products.

But as domestic climate change legislation comes up for debate and world leaders descend on Copenhagen, Picarro also hopes to be a key player in the effort to measure greenhouse gas.

“If we don’t do this correctly, we’re going to be dealing with massive economic and environmental consequences,” Woelk said. “It’s the elephant in the room that everyone is ignoring.”

Contact Dana Hull at 408-920-2706.

What Picarro does

The Sunnyvale company makes scientific instruments to measure greenhouse gases such as carbon dioxide and methane in quantities as small as parts per billion.

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